Question
Inc. has 1 million shares of common stock outstanding at a book value of $40 per share. The stock trades for $50 per share. It
Inc. has 1 million shares of common stock outstanding at a book value of $40 per share. The stock trades for $50 per share. It also has $10 million in face value of debt (corporate bonds of 5 years with coupon rate 10.5%) that trades at 110% of face value. The companys equity beta is 1.2. The risk-free rate is 4% and the market return is 10%. The tax rate is 35%.
What is the total market value of equity?
What is the total market value of debt?
What is its ratio of debt to total firm value in the market-value driven capital structure?
What is the before-tax cost of debt?
What is the after-tax cost of debt?
Whats the cost of equity?
Whats the after-tax WACC?
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